The European Bank for Reconstruction and Development (EBRD) has established an updated method for measuring a country’s transition to a market economy.
Initially, the EBRD created the transition concept in 1997. This was when the countries in which EBRD functioned were emerging out of communism. However, during that period, communism tainted market economies leading them to numerous challenges as they worked towards capitalism.
The transition concept claims that for a successful market, competitiveness is insufficient. In addition, markets must be inclusive, well-governed, environmentally friends, resilient and integrated to achieve maximum success.
Currently, the changes in the concept revolve around the developing global definition of a successful market economy. Moreover, the concept involves the various requirements of EBRD functioning countries to integrate into capitalism.
According to Hans Peter Lankes, EBRD’s Managing Director Corporate Strategy, “Because the EBRD’s world has changed, the definition that lies at the heart of its mandate has also been brought up to date.”
The EBRD Board of Directors have approved the innovated concept and will implement the practice next year.
“In our region today, we see how important governance and inclusion are for market reforms. The countries that have managed to create sustainable democratic institutions are also the ones that have made the most progress in economic transition,” said Sergei Guriev, EBRD’s Chief Economist.
The EBRD was launched in 1991 with the aim to aid developing countries. Currently, the bank functions in 36 countries of 3 continents. Moreover, it has invested above €110 billion in over 4,600 projects.